ROLLERCOASTER APOLOGISTS AT THE SPEED OF LIGHT

Investor

After 4 days of 4-5% swings of the Dow Jones Industrial Average, expect to hear some uber-Wizard on TV or radio explaining why these things happen daily.  Wizards sell common knowledge dressed to appear as wisdom, and when they don’t know WTF is going on, they still feel compelled to excrete advice, no matter how inane.

Citizens with the bad luck to have the car radio tuned to the news station will hear some Wizard identify some economic news as the culprit.  They will point to  a jobs report, an earnings report by a large corporation, a political event, or some other “cause” of stock market perturbations. Sometimes the network news stations will feel compelled to march out  a talking head for a 3-minute segment of free wisdom.

There is no record of any Wizard ever on camera confessing , “Beats the living shit out of me.”

Dollar$ notes that even a moment’s thought by even the financially unsophisticated will reveal that such alleged wisdom smells like the stuff that drops from the rear of barnyard animals.

Poof-Slinky Co.

The suggestion that major swings in the markets are caused by sentiment is by itself idiocy. “By some estimates, computer-aided high-frequency trading now accounts for about 70 percent of total trade volume.”

Algorithms on big honkin’ computers buy and sell securities and security derivatives all day long, drive volume figures sky high, hedge those trades with even more arcane derivatives, and are able to place those transactions on exchanges all over the world.

So much for the open market and level playing field–unless of course you as a Citizen never sleep and have direct access to markets.  Most of us aren’t even allowed to trade “safe” mutual funds until 4 o’clock.

For  super computers, the markets  never close, and differences of an eighth of a point from Dusseldorf to Shanghai will move millions of shares in less time that it takes you to read this sentence. That’s Mr. Machine work at light speed!

Wall Street Prognosticator

There is no market sentiment at work. Wizards just want you to think that the market is inhabited by humans. Ho Ho Ho.

Look, if the fate of French banks was  a concern two days ago, how did that concern vanish over night? If rioting in Greece sent the markets into a tailspin last week, what fundamental change in the Greek economy happened this week?

Wizards have to have  something to say, otherwise Citizens might stop paying outrageous fees for bad advice.

What the apologists won’t talk about is what they think is REALLY true. “My algorithm can beat up your algorithm.”

If they talked about that, the boss might take their bonus, and with it the house in the Hamptons, Junior’s tuition at Yale, and that oh-so-special gold key to the Executive Crapper.

THE SADDEST BASTARD

Back in the days when Barney Rubble and I were business journalists, I was sent to China for two weeks to report on the strides the People’s Republic was making, especially with its IT infrastructure. Hong Kong had just been reabsorbed by China, but when the Chinese did not arrest and execute every employee of the Hong Kong stock exchange, western corporations became excited about growth prospects in a country where capitalism might be allowed to flourish without central planning. They saw huge markets and a chance to sell stuff.

We met in Beijing with several Chinese ministers for a lavish dinner hosted by Ernst & Young. The food and service were impeccable. I ate things which I still have no name for, and in some cases I am sure I do not want to know, though I can tell you that shredded pickled ox belly is better than it sounds.

The ministers were looking for investors. They were wary of becoming a market or a source for resources, and given China’s history with the Imperialist West, they had reason to be.

They wanted money coming in, not going out, and they saw their challenge to be one of creating a business climate that would attract western money that would not be exploitive. In short, they had no desire to repeat the economic history of South America, a continent that shipped raw goods to the north where the goods were processed into products that were then shipped south. No, China would manufacture its own products, thank you very much, and the ministers were at pains to explain to the journalists in the room that western money making its way to China would be used to enhance the lives of the Chinese. They invited access, not exploitation.

Now you know what happened to the American furniture business.

In Beijing, I spent a very ordinary hour interviewing a highly placed executive from Ford Motor Company. This guy was as corporate as I ever met, deadpan in expression, irritated to have been told by higher-ups he would have to take some time to talk to me, frightened he might say the wrong thing. I explained I was not Mike Wallace and was not in search of scandal, and asked what Ford’s plans were in China.

At the interview’s end, I closed my note pad and asked the guy where he was from.

“I work for Ford.”

I thought he misunderstood. I was making small talk. I was curious to know where in the US he’d come from, as I thought I detected a flat Midwestern accent. I said as much.

He resented the question. “I come from Ford. I am a citizen of Ford,” he said.

No smile; no irony. He was dead serious. A man without a country whose only allegiance was to the quarterly bottom line.

He walked me to the elevator.

DEFLATION NIGHTMARES

Next to Deflation, Inflation is the Arch-Angel Michael. Citizens have for so long been trained to think that the Great Economic Satan is Inflation,  Dollar$ is hard-pressed to find friends who understand the opposite.

And it is far worse.

Monetary policy already has limited social and economic impact, but on August 9 the Fed pledged to keep interest rates at or near zero for two years, an extraordinary event for an organization that meets monthly and ordinarily speaks in terms of annual quarters. Two years?

The Fed has kinda, sorta, confessed they are running out of ideas.

The immediate response by Wizards was a shout of joy. The Dow soared 400 points in minutes. But then the news rippled around the world, more sober markets in Asia and Europe digested mulled it over, and as Dollar$ writes (11 am 8/9/2011) the Dow is being slammed,  down 445.

The Bank of Japan has held interest rates in what was the world’s 3^rd largest economy at 1% or less since 1995. That’s nearly 20 years.

Look how much good low interest has done the Japanese.

In that time, the Japanese stock market has decline 75%. Think about that. If you opened a 10,000 yen college fund plan for your newborn kid in Yokohama in 1996, by the time the kid was ready to start school you’d have 2,500 yen.

That’s what Deflation can do. Inflation erodes your savings; but deflation washes them away.

Now it is our turn.

America is being revalued.

The Depression

The last time Deflation sharply hit world economies it was called the Great Depression. The apple that cost a citizen a dime in 1928 in 1933 cost a citizen $.01.

Same apple, same labor, same dirt.

You could not sell your orchard: no buyers.

You could not employ pickers: no revenue.

If you borrowed money against the orchard on the hope things would turn around….the bank got the farm.

Unemployment in the US hovered around 30%.

There are social costs. People who see no way to feed or educate their children first become frightened, then become surly, and finally they become angry. Angry people want culpability and take action; convinced their elected Weasels are lying unprincipled scum, they elect extremists who refuse any and all compromise.

In Germany, they elected Adolf Hitler.

Parallels

American housing is off peak by 30% in 5 years–same house, same land, just worth less.

American unemployment stays a stubborn 10% and promises to get worse.

American Citizens are listening to extremists called Tea Partiers. They proudly will not compromise. They are being met by mush-headed weasels who move toward them rather than make a stand on principles.

from Reuters

In England, surly youth, 20% unemployed, having no hope of a future, having had their financial aid for education sharply curtailed, have taken to new technologies to gather flash riots.

A Modest Proposal

Forty-three percent of the WORLD’S military budget is reportedly spent by the United States. It buys us only munitions and weaponry, items that only bring profit to defense contractors. That’s $700 billion per year.

We just might be able to maintain our position as the strongest nation in the world on half that. That’s a mere $350 billion. That would erase the national debt in 10 years. The dollar would be worth something. Businesses might engage the risks of new investments knowing Citizens would have money to spend. We might get crazy and educate youth to think–as a matter of pressing national security!

End warfare that in no way makes America more secure.

Write to your Weasel.  Don’t just sit there. DO IT!

If you do not give a crap about yourself, at least save my ass!